Omicron variant threatens Asia oil demand; pricing favors Atlantic crude

Recent shifts in the relative price of different crude grades have dealt oil exporters from the vast Atlantic Ocean basin the best chance in months to sell to top consuming region Asia, but sales have been sluggish as COVID-19 fears cool demand.

The Omicron coronavirus variant has curbed oil consumption in Asia just as the U.S. and West African sellers pinned their hopes on the changing market structure paving an easier path eastward than competing oil from the Middle East.

Global benchmarks Brent and West Texas Intermediate crude LCOc1, CLc1 were pummelled last week as tight supplies eased with U.S. strategic petroleum reserve (SPR) sales and a decision by the Organization of Petroleum Exporting Countries and their allies to boost output.

Brent crude’s premium to Dubai quotes DUB-EFS-1M sank to 2.56 U.S. dollars a barrel last week, the lowest since March, making the export of Atlantic Basin crude oil grades more attractive for Asian buyers, according to traders and Refinitiv data.

Sales of Nigerian and Angolan oil to India have picked up along with sales of U.S. WTI Midland crude to East Asia.

Angolan Girassol crude oil BFO-GIR and Nigerian Qua Iboe BFO-QUA have been offered at robust premiums of 1.60 and 1.40 U.S. dollars above dated Brent a barrel respectively on a free-on-board basis – still cheap compared with Middle East light grades.

“We’ve seen an arbitrage window open, and demand from India and some markets further East has been encouraging in recent weeks, so that’s kept offers high,” said one seller of West African crude oil.

“Trading has gotten quieter in the last few days though. There’s a lot that’s still uncertain about how/if new lockdowns will affect demand in the new year.”

With refinery maintenance season due from March and as refining margins have come off sharply recently on Omicron fears, Asia’s appetite might not be as robust as before.